TMI Blog2015 (2) TMI 483X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequently raised a dispute as regards the settlement alleging that settlement had been arrived at under duress and coercion. It filed an application under Section 11 of the Arbitration Act in this Court. The application was opposed by the insurer with a contention that the insured could not invoke the arbitration clause in the agreement as the agreement stood discharged by accord and satisfaction. Courts below are correct in their conclusion that, deposit of the amount in Escrow Account was condition precedent to the arbitration agreement. In the circumstance, unless the condition is fulfilled, the arbitration agreement does not get activated and come into existence. A mere writing on a piece of paper with signature of the parties by itself cannot mean existence of an agreement. What is material, is the intention of the parties in executing the document. Both the Courts below have also held that, the application for reference to arbitration is nothing but an attempt to protract the hearing of the appeals. It is nobody's case that the appeals have remained pending on account of procedural delay. The Court, as well as, KDMC are ready and anxious for taking up the appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... property taxes. Being aggrieved by the rateable value fixed of the properties and the tax charged thereon, the petitioner filed eight appeals under Section 406 of the Bombay Provincial Municipal Corporation Act, 1949 ( BPMC Act for short) in the Court of Civil Judge, Senior Division, Kalyan ( CJSD for short). The details of the appeals are tabulated below :- Municipal Appeal No. Amount (Rs.) Bill No. 52/96 1,20,44,430.00 33602 18/97 2,31,98,033.5o 33628 19/98 3,41,45,421.5o 5201 09/99 4,28,93,736.5o o10301 04/01 5,15,74,599.5o 205 33/01 6,23,37,714.00 54335 23/02 7,31,00,828.00 61054 20/04 7,82,27,274.00 6713 3). The petitioner had earlier filed Writ Petitions in this Court to challenge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heduled/Nationalised bank. The Escrow amount was to remain with the Escrow agent until the decision in the dispute as regards the taxes and then payment made in accordance with the decision. The petitioner and KDMC further agreed that the dispute relating to rateable value and tax charged by KDMC upto the date of sale shall be referred to arbitration as provided under Section 408 of BPMC Act. Both were to make separate applications giving their consent to the arbitration to the Court of CJSD, Kalyan where the appeals are pending for referring the dispute to the arbitration by a retired Judge of the High Court of the Supreme Court as mutually agreed upon. 5). Without depositing the amount in the Escrow Account, the petitioner, by its letter dated 6th October, 2009 requested Justice A.P. Agiar (Retired) for acting as a sole arbitrator for adjudication of the dispute relating to the rateable value. By the letter dated 8th October, 2009 Justice Agiar (Retired) gave his acceptance. KDMC also by its letter dated 25th November, 2009 made a similar request to Justice Agiar (Retired). Then, on 13th July, 2010, a common application was filed before the Court of CJSD under Section 408 of B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liance of the provisions of Chapter V of BPMC Act. The next shortcoming noted by the Court of CJSD was of the failure on the part of the petitioner to deposit the amount of ₹ 6,68,76,000/- in Escrow Account. It further opined that, execution of the agreement dated 22nd April, 2009 was in fact a way found out by the petitioners to prolong the matter. 9). In its appeal before the District Court filed under Section 411 of BPMC Act, the petitioner contended that once there was an agreement entered into by the parties to refer the dispute for arbitration, it was not open for any party to resile from the agreement. Further, the mandate of Section 408 of BPMC Act and of Section 8 of the Arbitration and Conciliation Act ( Arbitration Act for short), is such that the Court is bound to refer the matter for arbitration. It was also contended that, opening an Escrow Account and deposit of amount therein has no bearing with the issue of referring the matter to the Arbitrator. Besides, both the parties had already acted upon the agreement by approaching the sole arbitrator and obtaining his consent. 10). The KDMC, on the other hand, argued before the District Court that deposit of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... condition. According to the petitioner, the sale of land by the petitioner to Raheja Universal, as well as, Clauses- 1 and 2 of the agreement have no bearing on the matter, with respect to rateable value and tax on the property in question, being referred to arbitration. The agreement also does not contain termination clause in case of breach of any of the stipulations of the agreement. 13). In the above factual background, the two questions that would arise for consideration of this Court are :- (i). Whether in view of Section 8 of the Arbitration Act and Section 408 of the BPMC Act, mere existence of a clause for arbitration in an agreement, ipso-facto casts an obligation on the Court to refer the matter for arbitration, and (ii) Whether deposit of ₹ 6,68,76,000/- in Escrow Account by the petitioner is the condition precedent under the agreement for reference of the dispute to arbitration. 14). It would be convenient to reproduce Section 8 of the Arbitration Act and Section 408 of the BPMC Act for ready reference : 8. Power to refer parties to arbitration where there is an arbitration agreement.- (1) A judicial authority before which an action is brought ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the parties to arbitration. However, that is preceded by the need of consideration of existence of an arbitration agreement. Both the provisions empower the Courts before whom the proceedings are pending, to refer the parties to arbitration, where there is an arbitration agreement. (emphasis supplied). Therefore, even if the document of agreement between the parties contains a clause for reference of the dispute to arbitration, the Court is required to first ascertain that there is an arbitration agreement in existence between the parties. This view is in fact supported by the decision cited by Mr. Sawant as can be seen hereinafter. 17). In the decision cited, the question of existence of an arbitration agreement arose for consideration of the Apex Court in the facts of discharge of the agreement by performance and satisfaction. The dispute before the Apex Court had arisen out of a contract of insurance, which contained a clause for arbitration. There was a settlement arrived at between the parties as regards the insurance claim and the insured had issued discharge voucher-inadvance acknowledging receipt of amount in full and final settlement of the insurance claim. The insur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decided by the arbitral tribunal on taking evidence, along with the merits of the claims involved in the arbitration. The Chief Justice has to decide whether the applicant has satisfied the conditions for appointing an arbitrator under Section 11(6) of the Act. For the purpose of taking a decision on these aspects, the Chief Justice can either proceed on the basis of affidavits and the documents produced or take such evidence or get such evidence recorded, as may be necessary. We think that adoption of this procedure in the context of the Act would best serve the purpose sought to be achieved by the Act of expediting the process of arbitration, without too many approaches to the court at various stages of the proceedings before the Arbitral tribunal. 47. (iv) The Chief Justice or the designated judge will have the right to decide the preliminary aspects as indicated in the earlier part of this judgment. These will be, his own jurisdiction, to entertain the request, the existence of a valid arbitration agreement, the existence or otherwise of a live claim, the existence of the condition for the exercise of his power and on the qualifications of the arbitrator or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of Arbitral Tribunal under Section 11 of the Arbitration Act, one of the preliminary issues that the Chief Justice or his designate is bound to decide is, whether there is an arbitration agreement and whether the party who has applied under Section 11 of the Act, is a party to such an agreement. If the respondent, to the application contends that, the dispute is not arbitrable on account of discharge of a contract in a settlement agreement and the claimant contends that it was obtained by fraud, coercion or undue influence, the Chief Justice or his designate may decide the same, if necessary, by taking evidence. Alternatively, he may leave the issues open with a direction to the Arbitral Tribunal to decide the same. Thus the issue can be decided by the Arbitral Tribunal only if the Chief Justice/designate leaves the question to be decided by the Arbitral Tribunal and gives directions in the regards. 20). The Apex Court has thus drawn distinction between reference to arbitration of dispute without intervention of the Court and the reference to arbitration with recourse to Section 11 of the Arbitration Act. Where the reference is made without intervention of the Court, the Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s obvious that, KDMC agreed to give No Objection Certificate only because of the promise from the petitioner to deposit the entire tax dues in a Escrow Account. The petitioner has resiled from the agreement by not depositing the amount. 23). The three material clauses from the agreement dated 22nd April, 2009 i.e. clauses-1, 2 and 6 (the arbitration clause) read as follows :- 1. The Corporation shall issue No Objection Certificate to the company for sale of Saleable land admeasuring 339.40 acres as per Annexure B stating that the purchaser shall be liable for the municipal taxes charged by the Corporation including Open land tax only from the date of conveyance irrespective of tax dispute of the said land between KDMC and NRC Limited, provided that the Company deposit an amount of ₹ 6,68,76,000/- in the Escrow Account in accordance with para 2 of the agreement. The said No Objection Certificate shall be issued within 7 days from the date of Execution of this agreement as per draft given in Annexure D annexed hereto. 2. It is agreed that the agreement for sale dtd. 1/3/2007 and supplementary agreement dtd 29/9/2007 between NRC Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to be issued within 7 days from the date of the agreement. For this to happen, the petitioner had to deposit the amount within 7 days from the date of the agreement. But the very next clause, sets the condition at naught, by recording one of the terms of the agreement between the petitioner and the purchaser of the property. Clause-2 records that, the purchaser had already released two installments of the consideration and that the third installment was to be paid after (i) getting No Objection Certificate from KDMC, (ii) completing fencing of the property and (iii) execution of conveyance. The clause further says that, the petitioner shall deposit amount in Escrow Account within FOUR MONTHS after the payment of the third installment. This would mean that, the petitioner agreed to deposit the amount on expiry of substantial period after completion of transaction of sale. In this way, the petitioner made the property unavailable to KDMC for recovery of it's tax dues. It would be pertinent to note at this stage, that caught in such situation, KDMC issued the No-Objection Certificate on the basis of which the petitioner has already received the third instalment of considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of procedural delay. The Court, as well as, KDMC are ready and anxious for taking up the appeals for hearing. But, there was clear reluctance on the part of the petitioner in prosecuting the appeals. After obtaining concession from the Apex Court in November, 2006 the petitioner has not taken any step to lead evidence of it's valuer. Today, it is 18 years since the filing of the first appeal by the petitioner and 10 years since the filing of the last appeal. It would also be relevant to note here that, the petitioner had initially filed Writ Petition to challenge the demand for taxes when the petitions were patently not maintainable. Had the petitioner on due adjudication of the dispute discharged it's tax liability, a substantial amount would have been available to KDMC for utilisation for public purposes. On account of the mischievous and dishonest conduct on the part of the petitioner, the public body has been deprived of it's legitimate funds from the year 1996 till date. 28). For all the above reasons, the petitions are dismissed with costs. The petitioner shall pay costs quantified at ₹ 1,00,000/- (Rs. One Lakhs only) for each petition to respondent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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